BERLIN (Reuters) - German Finance Minister Wolfgang Schaeuble on Tuesday rejected U.S. criticism of Germany’s record current account surplus, setting the stage for a heated debate on trade when G20 policymakers meet next week.
Germany holds the presidency of the G20 leading economies this year, a platform Chancellor Angela Merkel wants to use to safeguard multilateral cooperation after U.S. President Donald Trump questioned international alliances and obligations under plans to put “America first”.
Ahead of the G20 meeting in the German town of Baden-Baden, Trump’s trade adviser Peter Navarro said on Monday the $65 billion U.S. trade deficit with Germany was “one of the most difficult” trade issues. Bilateral discussions were needed to reduce it outside of European Union restrictions, he said.
Navarro’s comments followed his complaints last month that Germany was exploiting a weak euro to gain a trade advantage.
Speaking to foreign journalists in Berlin, Schaeuble said Germany’s current account surplus was a result of the high competitiveness of its companies and that the euro zone as a whole was benefiting from Germany’s economic strength.
“Nobody can claim that we are achieving these surpluses through (currency) manipulation,” Schaeuble said, adding that the European Central Bank, an independent body, was in charge of the euro.
Touching on another thorny issue between Berlin and Washington, Schaeuble called for further steps by the G20 to strengthen financial market regulation.
“We’re not yet at the finishing line,” Schaeuble said, adding that governments should not forget the lessons learned from the global financial crisis triggered by bad loans in the U.S. a decade ago.
One of the main themes of the G20 meeting next week would be to increase the resilience of economies against future shocks by implementing structural reforms, he added.
Trump has ordered reviews of major banking rules that were put in place after the global financial crisis.
This prompted a warning from Jens Weidmann, an ECB policymaker and president of Germany’s Bundesbank, who said last month it would be a mistake to roll back international regulation that had forced banks to build bigger buffers.
Schaeuble said he would meet his U.S. counterpart Steven Mnuchin on Thursday next week to prepare for the broader Baden-Baden meeting on March 17-18. Merkel and Trump are due to meet in Washington on Tuesday.
Turning to China, Schaeuble said it and Germany favored an international order of free trade and open global markets. “But we are also very much advocating that this is respected when it comes to investment by foreign companies in China,” the minister said.
German Vice Chancellor Sigmar Gabriel has suggested that the European Union should refocus its economic policy toward Asia, should the Trump administration pursue protectionism.
In a sign of already shifting trade flows, China became Germany’s most important trading partner for the first time in 2016, overtaking the United States, which fell to third place behind France.
Editing by Madeline Chambers and John Stonestreet